May 30, 1941

NAT

Harry Rutherford Jackman

National Government

Mr. JACKMAN:

I am opposed to the

increase in the sugar tax. The minister made an accusation against me which I think was most unfair, and I should like to speak on behalf of some of these "special interests" for which he says I sometimes try to have taxes reduced.

In the constituency of Rosedale, which I have the honour to represent, there were just one year ago no fewer than 10,000 people who were forced to accept relief in order to live. Those people obviously did not have adequate incomes. In that constituency there are returned soldiers living on the so-called "bumt-out soldier's" pension of $40 a month, and yet the minister believes that this tax on sugar is not going to be a substantial burden to those people. It will amount to $5 or $6 a family. When a man's work is very uncertain; when he is unable to do a real piece of work because of his physical condition; when he has to pay an extra $6 or $7 throughout the year, and when he receives only $40 a month, a tax of this kind is a substantial hardship.

I agree with the hon. member for Rosetown-Biggar when he says that this tax might easily have been left off, and the money raised elsewhere. I should also like to point out to the minister some of the other "special interests" whose taxes I endeavoured to have reduced. In the last few days I have endeavoured to have reduced the succession duties on the estates of soldiers who might die overseas. I felt that the amount was severe, and that something should be done to lessen it.

Another of the "special interests" I have been representing has been the soldiers who were taxed 10 per cent on transportation fares, a tax which was subsequently eliminated. If

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at times I speak about subjects about which I know, and with which I come in contact in my daily life, I believe it is only right that I should do so. I know about those subjects- and I am not like the Minister of Finance who put a tax on Canadian bonds payable in United States exchange, and subsequently withdrew the tax. Then, when an hon. member asked why he had put on the tax and then subsequently withdrew it, he said, "I must admit that it was due to my inexperience."

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SC

Victor Quelch

Social Credit

Mr. QUELCH:

I have said very little up to this time on the whole question of taxation, and mainly for this reason, that I believe in the pay-as-you-go policy. If we are going to have a pay-as-you-go policy, we must have heavy taxation. Up to the present time I have voiced very little criticism of the heavy taxes which have been imposed upon the people. When we compare the tremendous sacrifices being made by the people overseas with conditions in Canada, we cannot say that the people of this country are having to make any very great sacrifice. '

I should like to draw the attention of the minister to the fact that in the past he has laid down a definite policy with regard to war finance and taxation. I must admit frankly that I find it hard to follow that policy in connection with some of the taxes being imposed to-day. I should like to quote what he said last year:

3. That the task of finance is not only to provide the funds which are used to pay for the war services but more fundamentally is, by taxing and borrowing, to restrict the civilian demand for economic resources in order that they will be available to the defence or supply-departments when required.

And again:

6. That taxation should be imposed upon, a basis of equality of sacrifice, having regard to ability to pay.

I find it hard to understand how the tax on sugar, how the tax on gasoline used by farmers, how the national defence tax on people in the $660 income bracket, come within that definition. It certainly is not according to ability to pay, and we should not desire to restrict the consumption of these lines. I voiced no protest in connection with the higher taxes on income. As a matter of fact, I believe we could go still further. I voiced no protest regarding the excess profits tax. I should like to see it made one hundred per cent. I voiced no protest regarding the succession duties. I believe that these are all just taxes at a time like this, but I cannot see any justification for increasing the taxation of people who have not the ability to pay. This

[Mr. Jackman.l

is not in line with the principle laid down by the minister, and it certainly is not necessary to restrict consumption in these lines. Speaking the other day in connection with the gasoline tax, the minister suggested that apparently some hon. members were more interested in getting votes than in supporting a necessary war policy at this time. The minister's words were:

I do not blame him altogether, but he places a loyalty to the financial dollar and cent interests of his constituents above practically every other earthly consideration.

I thought that statement was addressed only to the hon. member for Rosthern; but according to the newspapers, the minister was referring to me and to other hon. members. I did not understand that then, or I would have replied. Apparently he was referring to all hon. members who were defending the tax on gasoline. I should like to have the minister justify at this time an increase in taxation which is not based upon ability to pay and which is not necessary for the purpose of restricting consumption of a particular article. Those are the two principles which he laid down and stressed in his speech on November 21. First of all, the main purpose of taxation was to restrict spending, restrict the purchasing of commodities, and, second, it was to be based upon ability to pay. I should like the minister to explain how these taxes meet those requirements.

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

It is always a pleasure to engage in a discussion Of fundamental principles with the hon. member for Acadia. I do not think this is a particularly good tax. It is an easy way of getting quite a lot of money. I would not say that that is the only virtue it has, but that is a great virtue under present conditions. There is this further thing to be said about it. For the most part, the sugar used in this country must be brought in in ships and shipping is exceedingly scarce. To an extent this tax on sugar will discourage consumption and place that much less strain upon shipping. However, I would not say that that was the major consideration in the imposition of this tax.

I think I stated1 in my budget address that this was the only tax which was purely a consumer's tax based upon the financial needs of the administration. The budget is remarkably free from these consumer taxes. Sugar is a necessity, but it is not purely a household necessity. It is used in connection with many things which are a little beyond the description of necessity. I am not prepared to stand here and say that this is an ideal tax; it certainly is not. I am not prepared to say that it will always be possible to impose ideal

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taxes. In fact, I think every one of these taxes has been opposed by some hon. member. The necessity for taxation is admitted, but the undesirability of each tax has been stressed. There may have been a few exceptions to that, but an argument has been made against nearly every tax.

We must have taxes, at least according to our views. I think I said, in the speech to which the hon. gentleman referred, that he would have us print money, to which he took some exception. I think, however, that is what he advocates, and all I can do is disagree.

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SC

Victor Quelch

Social Credit

Mr. QUELCH:

I was wondering why we have not taken steps to increase the production of sugar within Canada, especially in view of the difficulty in connection with shipping to which the minister has referred. The production of sugar in the west could be expanded tremendously, and this would help solve the problem of wheat production. It would be possible for many farmers to go into the production of sugar beets, and instead of producing a commodity which is now a surplus, we would be producing a commodity which is scarce at the present time.

The last time I spoke I suggested that we could very well place a tax on advertising, and I cannot understand why the minister has not done this. This would be a profitable form of taxation. I consider it a detriment that we should have these large advertisements in our periodicals and papers. What are they doing? They are trying to get people to spend more money, and the minister is trying to get people to spend less money. They are working against the minister; their efforts are subversive. This would be a good place for a really heavy tax.

As I said before, with the exception of one or two items I have not opposed any of these taxes. The minister himself admits that this is not a good tax. Even yet, I think we could safely increase the income tax and the succession duties tax, yes and even the liquor tax and the excess profits tax up to 100 per cent. I should like to see all these taxes increased during the war. On the other hand, I am opposed to floating at this time a bond issue of $600,000,000. If the purpose of that is to restrict spending, then I contend that the proper way to do that is by taxation and not by the issue of bonds. If the purpose of these bonds is to raise revenue, then I contend that the proper way to do that is through the Bank of Canada.

The minister referred to the printing of bills, but I do not think that is a fair statement. Last year, when we borrowed $490,000,000 from the Bank of Canada from May 1 to June, did we print $490,000,000 worth of bills? I do not

think we did. When we borrowed $250,000,000 later on in the year, did we print another $250,000,000 worth of bills? I do not think we did. It is nonsense for the minister to suggest that, when I urge that we use the Bank of Canada, that means printing money to that extent. All it means is increasing the cash reserves of the chartered banks and the amount of money they have on deposit with the Bank of Canada. We can very well prevent, by the means I have suggested in the past, the chartered banks from taking advantage from this increased cash reserve to expand their loans. Therefore I do not think the minister's talk about printing bills is based upon fact. He knows it is just common talk to scare the people. I challenge the minister to prove that the $490,000,000 which we borrowed last year brought about an issue of $490,000,000 of new bills, or that the $250,000,000 borrowed last January meant the printing of $250,000,000 of new bills. It did not. We can use the Bank of Canada without printing a single dollar bill, unless those bills are required in circulation.

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LIB

Frederick William Gershaw

Liberal

Mr. GERSHAW:

I should like to draw to the minister's attention a subject I have mentioned before, namely, giving some encouragement to the beet sugar industry in this country. There are large irrigation districts which are having a hard time getting along and other areas which could easily be irrigated if there was the prospect of expansion of the beet sugar industry. At the present time we are using only about 12-4 per cent of sugar from our own home-grown raw materials. If we could increase this amount by, say, reducing the tax on sugar produced from homegrown raw material, it would help to expand these districts, help to give employment, help the live stock industry, and be a real effort towards getting away from relief and providing employment for a class who have had a very hard time in the past.

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SC

John Horne Blackmore

Social Credit

Mr. BLACKMORE:

This is an important matter, too: that every sugar factory which would be established would be a source of revenue from a dozen different points of view. There would be the revenue from the gasoline tax, from the sales tax, from customs duties, from excise, and from many other sources; there would be revenue directly and indirectly.

There is one thing I aim never to do in my life, and that is to say, "I told you so," but I am going to come close to it to-night. Ever since I came here, I have on many occasions risen in my place and told the government that the time would come when we would need sugar and that, therefore, we ought to expand

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our own sugar industry. But never a thing done about it! The only thing ever done was the attempt last spring to destroy it.

Let us do some realistic thinking here. There is in this country, as the hon. member for Acadia and the hon. member for Medicine Hat have said, almost an unlimited capacity to expand our sugar production. If we are having trouble now over shortage of ships, what do hon. members imagine our condition will be a year from now and perhaps a year from that? There is going to come a time, as I hinted the other night, when we may have to send three pounds of sugar from Canada to get one pound to Britain. What condition shall we be in then in order to measure up to our responsibility of delivering the goods? I do not believe there is on the face of this earth a group of people more absolutely foolish in Itheir mismanagement of their country than the Canadian people at the present time, and I am going to take occasion to say a little more about that by and by. We are neglecting, for instance, the development of our sugar industry. We could produce every year right here in this dominion twice as much sugar as we could consume in a year. Every man who will take the trouble to face the facts would be more comfortable in his mind if he knew there was a full year's sugar supply in Canada for Canada, and if in the next two or three years he would know where Britain might get her sugar in case of need.

Who would have imagined a year ago that the Germans would be where they are now? Who would have imagined two years ago that they could possibly get where they are now? Who can begin to surmise where they will be a year from now? I do not think I shall say any more on the expansion of the sugar industry just now.

I feel personally that we are making in this tax a bad mistake. I have just come into the chamber from an errand on which I had to go, and I think the minister was holding forth that this was not a sound tax. I agree with him. I compliment the minister, too, upon the fact that he has built a budget in which there are very few consumer taxes. I recognize that, and it is a good point.

I should like to turn for a minute to the question of the creation of money. I do not wish to go into this too far. I have been wondering whether the minister was bound by some considerations external to the country in this matter of creating money, but the remark he made just now indicates that he is bound by considerations within his own mind and in the minds of the people who advise

**Mr. ftlarkmore.]

him. He may not agree with this, but let me tell him and the members of this administration that if, in this crisis, they neglect the capacity of this dominion to supply funds by the application of their power, authority and responsibility given under items 14 and 15 of section 91 of the British North America Act they will be responsible for Canada's deficiency in the war effort such as it may be. They are taking for granted that expansion of money is impossible and would cause inflation. That is a serious thing to take for granted. I do not think I will say anything more on that except to point out that if it is possible to create money without causing inflation-and' beyond a shadow of a doubt it is up to a certain point-and since we have price control in Canada without which prices would go up out of sight in a very few years, we can hold prices down with an expansion of money just as well as we are holding prices down now. If the principle were adopted that a good deal of money can be created-I am not saying a great deal, but two or three hundred million dollars-we could remove a lot of these nuisance taxes from the people. That is where I hold the minister and the administration responsible for a great deal of unnecessary taxes.

When I was talking to the Conservatives last night and suggested to them that they did not have any alternative proposal, some of them misunderstood. Let me make it explicit. The only proposal I have heard them make is some other kind of tax. They do not want this ox gored but some other ox. It is the same thing; it is the goring of another ox. If they can suggest a means whereby money can be obtained in this country without additional taxation and without borrowing, they will be doing something that is worth doing in this countiy at this particular time. I maintain that just so long as the government imagines that Canada's capacity to exert herself financially is governed by her ability to tax and her ability to borrow, she is making a grave blunder and we shall, as surely as we sit here, be held responsible by generations yet to come. If disaster should come to our cause to-day, the administration that sits here will have their names written in black in history if they neglect to use the financial and economic capacities of this country which are right in their hands to-day through the British North America Act.

As to printing bills, there is no need to print bills. The minister has the idea, as have several Liberals who have spoken with me within the last few days, that the social credit proposals involve having huge rolls of bills with printing presses running all over this

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country, but they have no excuse for thinking that, because there are men here in this house who know just what the social credit proposals are, and any man in the Liberal party can get information from these men if he does not want to carry away a lot of nonsense in his head. To the extent that the Liberals are neglecting to inform themselves and use the sources of information right here at their disposal, they are going to be held accountable by future generations. Social eredit does not envisage the printing of a great number of bills.

To illustrate: Suppose for a minute or two, that we wished to construct a sugar factory. Social credit would cause the banking institutions of this country to advance credit to an organization to build a sugar factory. There might not be a dollar bill involved; it would merely be a call on the credit of Canada, and it could be done through the institutions we have. Similar action coidd be taken all over the country to promote industries in every direction, greatly increasing the actual goods-producing power of the nation. I do not wish to go into detail; it is not in order to do it.

It is to me one of the strangest things that, with people here who are so sincere, so well informed on the matter of money, and so confident they know the way, as the group with which I am associated, not a single member of the administration has approached at any time any one of us asking to be given any idea as to what the possibilities are with respect to social credit. The assumption is that we just do not know. That is the most fatuous assumption that any group of governing men could possibly make. There is always a chance that any movement such as the social credit movement might be right. I will at this time delay the committee no further.

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LIB

Jean-François Pouliot

Liberal

Mr. POULIOT:

I always listen with the

deepest attention and the greatest interest to the remarks of my hon. friend the leader of the Social Credit group. This is not the first time that he has expounded those theories in this chamber. But he has his own way of expressing them, and they seem always new. When I list'en to him, it is as though I had not heard these theories before, because he has the gift of making each time a new presentation. I know he speaks with great sincerity about the problem of money. It seems to me, however, that he overlooks one fact, namely, that money is not the principal; it is only an accessory, and it must be considered accordingly.

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ND
LIB
NAT
LIB

Jean-François Pouliot

Liberal

Mr. POULIOT:

But here we are discussing taxation, and I have already told my hon. friends of the Social Credit group that the best way to get information about currency and monetary business is to read quietly the reports of the various chartered banks and trust companies, the Canada Gazette, and other publications of the same kind. What I find most interesting are the tabulations which appear from month to month in the Canada Gazette. They are the monthly reports of our chartered banks. To my mind, it is impossible to discuss currency without having that kind of information in mind.

Of course there are learned doctors of philosophy-PhJDs-learned economists, and learned So-and-so's who have written on the same topic; but, strange as it seems, I have enjoyed the reading of official papers much more than those lucubrations, because with a little patience we can understand something of the contents of official publications, when we cannot understand a word of what is [DOT]written by economists, sociologists, and others of the same kind.

Therefore, sir, I speak to you not as a learned man-I confess I am not-but just as an ordinary man, a layman. On these questions I will agree with the leader of the Social Credit group only when he is able to satisfy my mind by giving me a clear explanation of his system. I have the greatest regard for him, but until now I have not had that pleasure. [DOT]

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ND
LIB
ND
LIB

Jean-François Pouliot

Liberal

Mr. POULIOT:

Of course, you see, I am not blind, 'but I am a little hard of hearing, and that is why I do not catch what has been said. I may be also a little hard of understanding-I say that in all humility-and I do not pretend to teach anything to anyone, I just try to explain when I understand something, and when I do not understand anything I do not try to teach others, because I know very well that the result of my teachings would be an awful mess.

Now, sir, to come to the point; there is something in high finance which I do not understand any better than I understand the theories of my hon. friends of the Social Credit group. On this point, at all events, I

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assume that we shall be in accord. In the first place, I have never believed in the Bank of Canada. I find it the fifth wheel of the coach. I shall not now enlarge upon the reasons why I am not enthusiastic about that expensive organization; I shall merely indicate why I am not satisfied with it.

In the first place, it is a mystery, and in my humble view there should be no monetary secrets from the members of the House of Commons. I have said this under other circumstances. What help would it be to Hitler to know what is the extent of any expenditure which is made here in Canada? When I am told that it would be a bad thing for the prosecution of the war to give us some information about the Bank of Canada or the foreign exchange control board, I am not satisfied with that answer. It is quite a long time ago that an ex-Minister of Finance told me that it was impossible to give the members of the House of Commons definite information about the doings of the Bank of Canada. In my humble view, the responsibility of finance should be now, as it was in the past, in the hands of the Minister of Finance. .

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SC
LIB

Jean-François Pouliot

Liberal

Mr. POULIOT:

It was with the utmost

regret that I saw that our securities, which were in the east block under the guard of the Minister of Finance, were being transferred to the Bank of Canada; and it was with still deeper regret that I learned from the press that these securities were transferred from the Bank of Canada to the foreign exchange control board, which does not issue our bank notes. What guarantee, therefore, is there for the bank notes? Our securities, which are the pledge for these bank notes, are in the hands of a body other than that which issues the bank notes. We have inflation, of course. If the issuance of bank notes is made by a body that is distinct from the one that holds our national securities, the bank notes are not covered when they are issued. Of course, it is the suggestion of the intelligentsia, and it was done before the time when the present Minister of Finance took charge of that department. I have, however, sufficient confidence in him to expect that he will put things in order in his department and that he will be strong enough to correct abuses.

Is it not my definite right as a member of parliament to ask for information with regard to this matter, which is of national importance? There is a question which has been on the order paper since May 23 and is now the first of the questions on the order paper today. The question has been there for some

time, and I want some definite information in answer to it. I have been refused information about the gold held by other countries and now in the vaults of the Bank of Canada but not in the possession of the Bank of Canada. I may tell the minister I have information that the transfer from the Bank of Canada to the foreign exchange control board was not authorized by the board of directors of the Bank of Canada. I shall say more, that when the Bank of Canada was instituted it was set up as a privately owned corporation, but now it is publicly owned, since the Dominion of Canada has purchased all the stock of that bank. As it is a publicly owned organization, how is it that we members of parliament are denied information with regard to it? We should be the first to know about it.

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LIB
LIB

Jean-François Pouliot

Liberal

Mr. POULIOT:

I regret very much that the Chairman says I am not in order. I always respect the Chair and I will not insist. I know, sir, that what I am asking is essential to an understanding of finance, and finance is not a complicated matter. It is most simple, and the explanation given must satisfy the mind. When we think of this as Canadian citizens, who expect that the future of this country will be bright after the sombre days through which we are passing, and that the sun of dawn will shine again after a very dark night, then, if we want that to happen, if we want the future days to be happier than those in which we are now living, we must be very careful about the financial structure of the country. Of course, the comparison about structure can be applied to many matters. It must be applied to the financial system. The basis or foundation of the financial system must be strong if we wish to build upon it. 1 shall have other remarks to make later on, but I would point out that we cannot give too deep study to this matter. I appreciate the fact that hon. members feel as I do, that this matter is serious and that we cannot give it too much thought and foresight-foresight for the future, so that the future shall be better than the present.

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SC

Victor Quelch

Social Credit

Mr. QUELCH:

I wish to ask the minister a question which he can answer on some other item. On the war appropriation bill I asked the minister how the lag between total expenditures and total revenue would be made up. In the budget speech he said that there was a lag of one billion dollars. It is proposed to make up S600,000,000 of that by the sale of bonds. How does he propose to make up the balance? Will it be by means

Questions

of bond issues or through borrowing from the chartered banks? That is, by monetary expansion.

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May 30, 1941